BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   AB 787|
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                                 THIRD READING


          Bill No:  AB 787
          Author:   Hill (D)
          Amended:  8/20/10 in Senate
          Vote:     21

           
           PRIOR SENATE VOTES NOT RELEVANT

          SENATE TRANSPORTATION & HOUSING COMMITTEE  :  8-0, 6/29/10
          AYES:  Lowenthal, Huff, DeSaulnier, Harman, Kehoe, Pavley,  
            Simitian, Wolk
          NO VOTE RECORDED:  Ashburn

           SENATE APPROPRIATIONS COMMITTEE  :  7-4, 8/12/10
          AYES:  Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
          NOES:  Ashburn, Emmerson, Walters, Wyland
           
          ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Smog check:  vehicle repair assistance and  
          retirement 
                      program

           SOURCE  :     Author


           DIGEST  :    This bill specifies that the Bureau of  
          Automotive Repair may pay to a person who retires his/her  
          vehicle under the smog check program and the Enhanced Fleet  
          Modernization Program up to $1,500 if the owner is  
          low-income, and $1,000 for all other motor vehicle owners,  
          as specified, deletes the provision of law that provides  
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          for repair assistance to vehicle owners whose vehicles have  
          been directed to a test-only smog check station, and  
          directs the resulting savings to the vehicle retirement  
          program.

           Senate Floor Amendments  of 8/20/10 lower the income level,  
          from 300 percent of the poverty level to 225 percent, that  
          a person must meet in order to be eligible for repair  
          assistance under BAR's consumer assistance program, delete  
          the cap of $2,000 that BAR may pay a person to retire  
          his/her vehicle and instead specify that BAR will pay just  
          $1,000 to retire a vehicle and $1,500 to a person who is  
          low-income, and conform the amounts of money that BAR pay a  
          person for vehicle retirement under the smog check program  
          and under the Enhanced Fleet Modernization Program.  

           ANALYSIS  :    To meet federal air quality standards,  
          existing law requires California-registered,  
          gasoline-powered vehicles and certain diesel-powered  
          vehicles to undergo biennial smog inspections to measure  
          motor vehicle-related pollutants.  New vehicles six model  
          years old and newer, vehicles with a pre-1976 model year,  
          electric vehicles, motorcycles, and large commercial  
          vehicles are exempt from the smog check program. 

          Upon initial registration and upon a change of ownership  
          and registration of a vehicle, the vehicle owner must  
          submit to the Department of Motor Vehicles (DMV) a valid  
          certificate of compliance indicating that the vehicle has  
          passed its smog inspection.  If a vehicle fails any  
          component of a smog inspection, the vehicle owner must,  
          with some exceptions, repair the vehicle and pass a  
          subsequent smog inspection before being able to register or  
          renew the registration of the vehicle.  

          Each year, the Bureau of Automotive Repair (BAR) directs a  
          certain percentage of vehicles that it deems to be "high  
          emitters" (currently, approximately 42 percent of vehicles  
          subject to the program) to specified "test-only" stations.   
          Test-only stations are those that test, but do not repair,  
          vehicles.  

          Under existing law, BAR administers a Consumer Assistance  
          Program that provides financial support to assist vehicle  

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          owners who have failed their smog inspection.  Vehicle  
          owners have the following options:

          1.  Repair cost waiver .  A waiver allows a vehicle owner to  
             register his or her vehicle, even if it does not pass a  
             smog inspection.  A vehicle owner qualifies for a repair  
             cost waiver after he or she spends at least $450 for  
             repairs, including parts and labor.  For low-income  
             vehicle owners, defined as persons whose income does not  
             exceed 185 percent of the federal poverty level, the  
             vehicle owner qualifies for the repair cost waiver  
             (known in this case as an "economic hardship extension")  
             if an estimate for repairs exceeds $250.  A vehicle  
             owner may apply for only one repair cost waiver for the  
             life of a vehicle.  Failures resulting from emissions  
             control equipment that is missing or that has been  
             tampered with are not eligible for a repair cost waiver.  
              

          2.  Repair assistance  .   Two categories of vehicle owners  
             are currently eligible for repair assistance under this  
             program.  The first consists of low-income vehicle  
             owners, defined as persons whose income does not exceed  
             185 percent of the federal poverty level, which BAR has  
             authority to increase to 225 percent, whose vehicles  
             fail their smog inspection.  The second category of  
             eligible vehicle owners consists of persons who were  
             directed to a test-only facility and whose vehicles fail  
             the smog inspection.  Under the repair assistance  
             program, BAR will pay up to $500 for repair costs,  
             subject to a co-payment of $20 for low-income persons  
             and $100 for all other persons.   

          3.  Vehicle retirement  .  The vehicle retirement program  
             provides vehicle owners compensation to voluntarily  
             retire (or scrap) their vehicles that have failed a smog  
             inspection.  Under this option, a vehicle owner applies  
             to BAR and receives an approval letter by mail.  The  
             owner then takes the approval letter to a vehicle  
             dismantler under contract with BAR for retirement and  
             payment.  The vehicle is removed from operation and  
             dismantled.  Existing law allows BAR to pay an owner who  
             elects to retire his/her vehicle up to $1,500 and to opt  
             to pay more than $1,500 if it determines that doing so  

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             will be cost-effective.  Currently, BAR provides $1,000  
             to a vehicle owner who retires his/her vehicle and is  
             working in cooperation with ARB to amend BAR's  
             regulations to provide $1,500 owners who are low-income.  
              

          To be eligible for any of these consumer assistance  
          options, the vehicle must have failed its smog inspection  
          and have been continuously registered for at least 24  
          months, with some exceptions, in an area where vehicles are  
          subject to biennial smog inspection.  
           
           This bill:   

          1. Deletes the provision that vehicle owners directed to  
             test-only smog facilities are eligible for repair  
             assistance and makes conforming changes.

          2. Directs the savings resulting from the elimination of  
             repair assistance for directed vehicles to the vehicle  
             retirement program.

          3. Specifies the maximum payment that BAR may offer for  
             vehicle retirement is $1,500 if the vehicle owner is  
             low-income, and $1,000 for all other vehicles.  Allows  
             BAR to pay more than the specified amounts based upon  
             the age of the vehicle, the emission benefit of the  
             vehicle's retirement, the emission impact of any  
             replacement vehicle, and the location of the vehicle in  
             an area of the state with the poorest air quality. 

          4. Conforms the amount of money that BAR may pay for  
             vehicle retirement under the Enhanced Fleet  
             Modernization Program to the vehicle retirement under  
             the smog check program.

          5. Requires a vehicle be continuously registered in the  
             state for two years prior to retirement, and have failed  
             a lawfully performed smog check.

          6. Establishes that a "low-income motor vehicle owner" is a  
             person whose income does not exceed 225 percent of the  
             federal poverty level.


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           Similar legislation  .  This bill is very similar to AB 823  
          (Hill), which was vetoed by the Governor.  In his veto  
          message, the Governor encouraged the author to direct any  
          savings achieved by the bill to the vehicle retirement  
          program, which this bill does.  Comparing this bill to AB  
          823, this bill also clarifies that vehicle retirement is an  
          option for any person whose vehicle fails its smog  
          inspection and increases the income, from 225 to 300  
          percent of the federal poverty level, that qualifies a  
          person as "low income" for purposes of participating in  
          BAR's Consumer Assistance Program.

           Benefits of vehicle retirement  .  By incentivizing the early  
          retirement of fully functional vehicles, vehicle retirement  
          programs accelerate emission benefits that would have  
          otherwise occurred by the natural turnover of the fleet.   
          Accelerating emission reductions will help to improve air  
          quality and public health, and further the state's ability  
          to attain federal air quality standards.  In addition to  
          these environmental and public health benefits, vehicle  
          retirement programs have economic benefits by incentivizing  
          the purchase of new or newer vehicles.  Automobile  
          manufacturers and dealers are likely to benefit by  
          accelerated vehicle purchases, which may be particularly  
          valuable in the state's current economic climate. 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

                          Fiscal Impact (in thousands)

           Major Provisions        2010-11             2011-12       
           2012-13   Fund  

          Expanded vehicle      Up to $11,000 to $22,000  
          annually*Special**
          retirement program

          BAR program administration              $1,675 to $3,350***  
          annually              Special**         

          Reduction in eligibility for            Estimated savings  

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          of ($4,066) annually          Special**
          vehicle repair assistance

           *   Assumes 22,000 vehicle retirements at $500 to $1,000  
              over current payment.

           **  High Polluter Repair and Removal Account (all costs  
              beginning July 1, 2011).  For 2009-10, this account  
              will end the year with a projected fund balance of  
              $2,240.  This account made a $20 million loan to the  
              General Fund in 2008-09, and is proposed by the  
              Governor's Budget to be repaid in 2010-11.

           *** Based on 25 to 50 percent increase in participation.

           SUPPORT  :   (Verified  8/16/10)

          AAA of Northern California
          Alliance of Automobile Manufacturers
          Association of International Automobile Manufacturers, Inc.
          Automobile Club of Southern California
          California New Car Dealers Association
          Department of Consumer Affairs


           ARGUMENTS IN SUPPORT  :    The author argues that 75 percent  
          of vehicular pollution is caused by just 25 percent of the  
          vehicle fleet.  Unfortunately, BAR's vehicle retirement  
          program is continually raided for General Fund expenditures  
          instead of being used to retire high polluting vehicles.   
          In addition, the author asserts that not enough  
          Californians are utilizing the vehicle retirement program.   
          There are over three million vehicles 15 years old or older  
          in California, yet only approximately 22,000 vehicles are  
          retired through the program annually.  Because vehicle  
          retirement programs are one of the most productive ways to  
          reduce air pollution, this bill authorizes BAR to increase  
          the incentive so that more people may participate in the  
          program and prevent funds intended for vehicle retirement  
          from being used for other purposes.  

          This bill also eliminates repair assistance for vehicle  
          owners who are directed to test-only facilities and whose  
          vehicle fails its smog inspection.  This form of repair  

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          assistance does not have an eligibility criterion based on  
          income; any owner who is directed to a test-only facility  
          and fails is eligible.  In fiscal year 2007-08,  
          approximately 46 percent of total expenditures for the  
          repair assistance program were for vehicle owners who were  
          directed to test-only facilities.  (BAR notes that some of  
          these may have been eligible under the income provision but  
          chose not to specify their income.)  The author argues that  
          this is an unnecessary subsidy for those who are otherwise  
          likely able to afford vehicle repairs.  This bill closes  
          that loophole and limits participation in the repair  
          assistance program to vehicle owners whose income level  
          does not exceed 300 percent of the federal poverty level.


          JJA:mw  8/22/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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